The Murray-Darling Basin Plan is running late, could cost half a billion dollars more and the authority overseeing its implementation is conflicted, a major new report has found.

In its five-year review of the plan, the Productivity Commission has recommended basin states take responsibility for implementing the controversial $13 billion plan, rather than the Murray-Darling Basin Authority (MDBA).

Key points:

Productivity Commission says Basin Authority is conflicted, should be split

Implementation of the Basin Plan could blow out by more than $560 million

20 per cent of consumptive water has been returned to environment

"The significant risks to implementation cannot be managed effectively under current institutional and governance arrangements," the Commission said.

"Reform is required.

"Basin Governments (not the MDBA) should take responsibility for leading implementation."

The Productivity Commission found that about 20 per cent of consumptive water available from the basin a decade ago had now been returned to the environment.

It also criticised the way the rollout had been handled, questioning who was in charge.

Conflict of interest at Murray-Darling Basin Authority

The Productivity Commission said key to a successful implementation of the plan was the splitting up of the authority initially tasked with implementing and enforcing the plan, the MDBA, to remove any conflict of interest.

"The MDBA has conflicting roles. It supports basin governments (as their agent) to implement the plan and is also required to ensure compliance with the plan," the Commission said.

"These conflicts will intensify in the next five years.

"The MDBA should be split into two separate institutions: the Murray-Darling Basin Agency and the Basin Plan Regulator."

Report shows progress says government

A statement from Water Minister David Littleproud said the Productivity Commission reported significant progress had been achieved in the implementation of the plan.

"The assessment finds the arrangements for environmental water are working well, that there is evidence of improved ecological outcomes, and basin governments have made significant progress implementing key elements of the plan," the statement said.

While South Australian Water Minister David Speirs welcomed the report, he said it showed there was more work to be done to implement the plan.

"The report reiterates that the 450-gigalitres of environmental water flow are critical for the health of the Murray-Darling Basin and ensuring the River Murray remains sustainable and productive," he said.

The Productivity Commission's report was handed to the government last month, just days after basin governments reached a major agreement.